US tariffs on Chinese exports will apply to engines and motors, construction and farming machinery, electrical, transportation and telecom equipment and precision instruments.
Counter tariffs by China will hit U.S. agricultural commodities, autos and aquatic products. Soybeans are the country’s biggest import from the United States by value.
Morgan Stanley estimates that world trade could be seriously disrupted as two-thirds of goods traded are linked to global value chains.
The Peterson Institute for International Economics shows that almost two-thirds of US imports from China come from companies with foreign capital, another avenue through which US tariffs targeted at China have an impact beyond its borders. Based on foreign investment flows, the capital is likely to have come mostly from the United States, Japan and South Korea.
Some analysts such as Singapore-based DBS say the US economy could suffer more than China’s, as US levies could affect American firms with investments in the country and Washington is also involved in other trade conflicts.
Uncertainty about trade could make banks wary of their exposure to affected industries and hurt the price and flow of credit.
It could also make businesses reluctant to invest. Any tariff pass-through to consumers could affect domestic demand and consumer confidence. Higher volatility in financial markets hurts all of the above.
A model by Pictet Asset Management reckons a 10pc tariff on US trade fully passed on to consumers could tip the global economy into stagflation and knock 2.5pc off corporate earnings globally.
Who is Most Exposed?
A DBS analysis shows that South Korea, Malaysia, Taiwan and Singapore are the economies most at risk in Asia based on trade openness and exposure to supply chains.
South Korea could see a drag of 0.4pc on growth in 2018, Malaysia and Taiwan lose 0.6pc, and Singapore 0.8pc. And the impact would be roughly double in 2019.
OECD data - which breaks down the value-added embodied in Chinese exports by its source country - shows Taiwan as the most exposed country in Asia with more than 8pc of GDP, followed by Malaysia at 6pc, South Korea, Hong Kong and Singapore at 4-5pc, Philippines, Thailand and Vietnam at around 3 percent and Australia, Japan and Indonesia at around 2pc.
There are other variations to consider. For instance, the US and China are Hong Kong’s major economic partners, but its economy is dominated by services, which are not subject to tariffs. An economy such as Vietnam’s, reliant on manufacturing, could feel more pain.